Latest DTCC CDS Update (Week Of July 31)
Due to popular demand, Zero Hedge is happy to bring back the weekly DTCC CDS gross/net open interest recap. The primary reason we dropped coverage of CDS data over the past month was/is our belief that both fundamental and technical analysis, in the face of a rapturous market is pointless, and the only thing that matters is the ticking sovereign debt timebomb, as indicated by various Federal Reserve disclosures such as the H.4.1, H.3, and Z.1. If you don't believe me, please call any fundamental analyst at either a sell or a buy side firm at 4:00:01 pm. Nine out of ten times you will get voicemail (which, all else equal, is better than a vibrating dildo). Nonetheless, for the sake of completeness, it is useful to see what this formerly very useful data point from the world of CDS indicates: so here is what the latest out of 55 Water street says.
Not surprisngly, mega poundage in financials with almost $100 billion in net rerisking over the past week on just over 13 thousand exchanged contracts. New trades for $344 billion were offset by full terminations of $445 billion - traders couldn't trade this sector fast enough. It is as yet unclear if the motivation was to hedge long equity positions via CDS purchases, or Cash-CDS cap arbitrage. Another squeezed sector was consumer services at $37 billion. The remainder of industries were mostly noise
In single names, rerisking dominated derisking. The most notable non-sovereign derisking names were Arrow Electronics, Banco Espirito Santo, ILFC, ArcerlorMittal, Disney, TCE, Holdings, Target,GMAC, and Glencore.
On the other side, Deutsche Bank was the safest credit in the world in the prior week based on open interest changes, followed by Barclays, DT, GECC, BofA, MS, Unicredit, Rio Tinto, Tyson, Kerr-Mcgee, UBS, Limited, Ford and a bunch of other zombie companies.
Total Gross CDS outstanding was at $26.6 trillion, a far cry from the $60 trillion or so a year ago. This consisted of $15.2 trillion in single names, $8.1 trillion in indices and $3.3 trillion in tranches, all of which were about 85% held by dealers. Non-dealer to non-dealer transactions were minute (About 0.1% of total), so all the hopes of the Agriculture Committee to curb this side of the CDS business might need a bit of a reevaluation.
As always, good luck making heads or tails out of this market in which the only thing that matters is whether or not some SPARC array has accidentally blown a fuse at 9:29:59 am, or whether Sky Net has attained sentient status.